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Interstate Realty Management Co. v. Community Realty Management

January 14, 2009

INTERSTATE REALTY MANAGEMENT COMPANY, PLAINTIFF-APPELLANT,
v.
COMMUNITY REALTY MANAGEMENT, INC., DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, Docket No. L-4283-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued December 15, 2008

Before Judges Carchman, Sabatino and Simonelli.

In this commercial case involving the contested distribution of management fees derived from affordable housing projects, plaintiff, Interstate Realty Management Company ("Interstate") appeals the Law Division's entry of summary judgment in favor of defendants. Plaintiff also appeals certain related orders entered by the trial court.

For the reasons described in this opinion, we affirm the trial court's rulings in part and vacate them in part. We remand the matter for a trial concerning the intended meaning of an ambiguous provision in the parties' contract that controls both the timeliness of plaintiff's present claims and its entitlement to any compensation.

I.

The underlying facts are complicated and involve a long chronology of business transactions and relationships. We shall summarize them from the motion record, mindful that we expect the proofs to be developed further on the remand that we have ordered in this opinion.

In the 1960s, Michael J. Levitt and Jack Soble owned Soble Construction, a company engaged in the development, ownership, and management of subsidized rental housing communities. Soble Construction retained the law firm of Rothenberg & Levine for its legal services. Specifically, Herbert Rothenberg, Esq., and Lee A. Levine, Esq., of that law firm primarily handled Soble Construction's legal matters.

Beyond providing legal services, the principals of the Rothenberg, Levine law firm, along with another New York attorney named Alan Morris (collectively the "Rothenberg Group"), began the syndication of affordable housing projects that Soble Construction was developing. Essentially, the Rothenberg Group sought to attract limited partners to invest in Soble Construction's projects. The Rothenberg Group received syndication fees for its efforts and the Rothenberg & Levine law firm received legal fees for performing the associated representation.

Additionally, Rothenberg, Levine, and Morris would name themselves general partners of each limited partnership. As general partners, they had the authority to select a management company for each project that would receive management commissions. It was Levitt's understanding at the time that Soble Construction's management company was to manage all of the projects syndicated by the Rothenberg Group.

This arrangement between the parties continued until 1974, when Soble Construction merged with U.S. Homes. Soon thereafter, Jack Soble died. Levitt then left U.S. Homes, taking the management of his projects with him. Rothenberg and Levine had represented Soble and Levitt in the merger of Soble Construction and U.S. Homes. The law firm also represented Levitt in his ensuing departure from U.S. Homes after Jack Soble's death.

Upon separating from U.S. Homes, Levitt formed plaintiff Interstate. He created Interstate to manage existing affordable housing projects that he already owned, as well as future properties that would be developed by his newly-formed separate development entity, Michaels Development Company ("MDC"). Rothenberg and Levine incorporated Interstate and MDC. Their law firm continued to perform legal services on behalf of Interstate and MDC and also on behalf of Levitt individually.

In or about 1974, U.S. Homes left the affordable housing market. At that time, the members of the Rothenberg Group were general partners of sixteen affordable housing projects developed by Levitt, all managed by U.S. Homes. As general partner, the Rothenberg Group could select the management company for each project that would replace U.S. Homes after it left the management business. U.S. Homes offered the Rothenberg Group the opportunity to take over the management of the projects.

Despite the fact that Interstate was already in the business of managing properties and Levitt had developed all sixteen projects, the Rothenberg Group did not offer it the opportunity to manage the projects. Instead, the principals of the Rothenberg Group formed their own management company, defendant Community Realty Management, Inc. ("CRM"). They awarded CRM the management contracts for all sixteen projects.

Upon learning that his attorneys formed CRM as a competing management company, Levitt became upset. He decided not to retain the Rothenberg Group for future syndications, unless he had a guarantee that Interstate would manage the properties or receive a share of the commissions if the projects were managed by CRM. This led the parties to enter into a Memorandum of Understanding ("MOU") in 1975, an agreement that is at the core of this litigation.

The MOU, which allegedly Levine drafted, was executed by the members of the Rothenberg Group, CRM, Levitt and his business partner, MDC, and Interstate. Levine and Rothenberg represented CRM in the transaction. Levine signed the MOU both individually and on behalf of CRM.

Levitt asserts that at the time he signed the MOU on behalf of Interstate, Levine and Rothenberg were acting as house counsel for Interstate. Levitt maintains that he was not represented by other counsel or told by Levine and Rothenberg to consult with other counsel.

The MOU reads, in pertinent part:

1. In connection with projects sold by [the Rothenberg Group] on behalf of 3M*fn1 (commencing with the Rolling Hills project) and pursuant to which [the Rothenberg Group] retain general partnership interests, CRM shall retain management thereof. CRM shall pay to Interstate seven twenty-fourths (7/24) of its management commission with respect to each project sold by [the Rothenberg Group] on behalf of 3M.

2. CRM shall pay over to Interstate by the tenth (10th) day of each month Interstate's share of commissions collected pursuant to Paragraph 1 hereinabove during the previous month. [(Emphasis in original).]

Furthermore, the MOU granted the Rothenberg Group the right to syndicate future projects by 3M.

The Rothenberg Group sold (or syndicated) five affordable housing projects on behalf of 3M: Brown Woods; Hilltop; Rolling Hills; Walker Village; and Edwardsville. CRM managed these properties and paid Interstate a share of the management commissions for many years.

Defendant CRM contends that the two sentences in paragraph one of the MOU, read in conjunction with one another, signify that CRM shall pay Interstate commissions so long as the Rothenberg Group retains its general partnership interest, and regardless of whether CRM manages the property. The motion judge adopted this construction.

Conversely, Interstate maintains that CRM should pay commissions as long as CRM manages the projects, irrespective of the Rothenberg Group's partnership interest in the projects. Interstate particularly relies on the deposition testimony of Levine, as drafter of the MOU and attorney and signatory for CRM, to support its position:

Q: From your understanding of the intent of the [MOU], as a signatory to it and as a lawyer who prepared it, once CRM obtained management pursuant to the procedures in Section 1, did it matter who thereafter owned the project in terms of CRM's obligation to pay or not pay Interstate as long as CRM kept management ...


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